Sunday, February 13, 2011

Whoever gets the newly printed money first sees the fewest harmful consequences from it.

In the USA, the economic problems are mild compared to the unemployment and starvation in other countries. This is the place where the printed money comes from. When you make new money and give it to yourself, you're always the richest person in the world. When you spend it, everyone happily takes it from you, and they feel rich too, for a few minutes. You bought something from them, and they were profitable for a few minutes. Prices of everything go up, because somebody's buying all of it with their new money. There is more money available for every bit of 'stuff,' more money per piece of food, more money for every refrigerator, etc. The amount of money divided by the amount of 'stuff out there' becomes larger, so the prices of everything go up. If there exists $50 on earth, and there exist 25 loaves of bread, then it's 50/25, or $2 per loaf of bread. If somebody makes new money, so that we have $100 on earth, and there are still 25 loaves of bread, then it's now $4 per loaf of bread.

But the price doesn't go up right away. It's still $2 a loaf on the first day that the money is printed. Whoever has the money first gets to sneak out into the world and NOT TELL ANYBODY that there's a bunch of new money which will raise the price of a loaf of bread to $4. They still get the cheap price of $2 a loaf, today. The first people to spend the new money get the most benefit from it, and they see a happy, nice, pleasant world around them where they can afford to buy whatever they want.

As the new money spreads outwards around the world, the LAST people to get that money benefit the least from it. By the time they get the new money, the prices of everything have already gone up. The price has gone up to $4 a loaf of bread by then. Those people have to pay the new, higher price of a loaf of bread. Only the very first few people to spend the new money were able to get bread for $2 a loaf.

That's a simple version of inflation. In reality it's more complicated. But that explains enough to give people an idea that the country that prints the most money first - the USA - has the easiest life and the fewest problems, while everyone else suffers more and more as prices go up all around the world.

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